Intersting Article : Well-oiled Machine That Did Little but Print Money, Day After D

[rxs0005 10]

On Wall Street, they were all known as "quants," traders and financial engineers who used brain-twisting math and superpowered computers to pluck billions in fleeting dollars out of the market. Instead of looking at individual companies and their performance, management and competitors, they use math formulas to make bets on which stocks were going up or down. By the early 2000s, such tech-savvy investors had come to dominate Wall Street, helped by theoretical breakthroughs in the application of mathematics to financial markets, advances that had earned their discoverers several shelves of Nobel Prizes.

 

 

 

http://online.wsj.com/article/SB10001424052748704509704575019032416477138.html?mod=WSJ_hpp_MIDDLETopStories

[DugDug 10]

Hmmm. reminds me of long term capital and the program traders getting blamed during the 1987 stock market crash.

It seems the more things change, the more they stay the same.

The best quant quote I have seen was from a quant guy who has been around and been successful for a long period (cant remember who...sorry) but he said the key is to know exactly how your model worked and when to use common sense and turn off the model.

thanks, interesting article.... I think I will get the book.

Edited January 25, 2010 by DugDug

[Marko23 10]

...when to use common sense and turn off the model...

 

They really stay the same.

The "inventor" of Gaussian coppula always warned, what would (not could) happen, if too many put this model into practice.